International Business Midterm

Namrata's ancestors grew up in India and were a poor family of farmers. Based on what you know about the caste system, which statement would be accurate about Namrata's ancestors? If her ancestors worked hard, the system would recognize their efforts and they would have been granted new occupations. Her ancestors, if successful, would move up to a higher caste or subcaste. Her ancestors would not have been able to move out of the class of poor working farmers. Since a caste system is an open form of stratification, her ancestors most likely moved up and down in social status.

Her ancestors would not have been able to move out of the class of poor working farmers.

The _____ is often seen as the lender of last resort. International Monetary Fund World Trade Organization International Development Association World Bank

International Monetary Fund

Regional economic integration offers significant opportunities for businesses. Which of the following is one of these opportunities? Markets that were formerly protected from foreign competition are increasingly open. Over time, price differentials across nations will decline in a single market. The business environment within each grouping has become more competitive. There is a likely long-term improvement in the competitive position of many firms within the areas.

Markets that were formerly protected from foreign competition are increasingly open.

Which of these is a characteristic of a pure command economy? The goods and services that a country produces are planned by consumers. All businesses are owned by the state. Prices are determined by market forces. There is free and fair competition between private producers.

All businesses are owned by the state.

A country limits the amount of sugar that can be imported into its country. This is an example of an import tariff. True False

False

A lead strategy involves delaying collection of foreign currency receivables if that currency is expected to appreciate and delaying payables if the currency is expected to depreciate. True False

False

Albert is an entrepreneur living in a high uncertainty avoidance culture. As such, he will be more willing to take risks and make changes. True False

False

Economic arguments for trade policy intervention are concerned with protecting the interests of certain groups within a nation, often at the expense of other groups, or with achieving some objective that lies outside the sphere of protecting the environment or human rights. True False

False

Globalization resulted in a decrease in non-U.S. firms' investment across national borders. True False

False

In a free trade area, countries are not allowed to determine their own trade policies with nonmembers. True False

False

People who violate folkways are considered to be evil or bad. True False

False

The infant industry argument relies on an assumption that firms can make efficient long-term investments by borrowing money from the domestic or international capital market. True False

False

The value systems and norms of a country have little influence on the costs of doing business in that country. True False

False

There is consensus that the EU is what economists would call an optimal currency area. True False

False

Under the Jamaica agreement, floating rates were declared unacceptable. True False

False

A pegged exchange rate means the value of a currency is flexible against a set of currencies. Ture False

False A pegged exchange rate means the value of the currency is fixed relative to a reference currency, such as the U.S. dollar, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.

The result of the Bretton Woods agreement was that fixed exchange rates were desirable. However, most countries preferred a floating exchange rate instead. True False

False In 1944, at the height of World War II2, representatives from 44 countries met at Bretton Woods, New Hampshire, to design a new international monetary system. There was consensus that fixed exchange rates were desirable.

A pen costs £50 in Britain. An identical pen costs $70 in the United States when the exchange rate is £1 = $1.50. Which of the following is correct? Britain offers a better deal. A trader can make money by buying the pen in Britain and selling it in the United States at $70. The deal is the same in both countries. The U.S. offers a better deal.

The U.S. offers a better deal.

Tariff barriers raise the costs of exporting products to a country (or of exporting partly finished products between countries). What is a likely consequence of these barriers? A firm may have to move all production facilities to another country, but thereby reducing their production costs. A firm may have to centralize all production activities in their home country. This may put a firm at a competitive disadvantage to indigenous competitors in that country. This may put a firm at a competitive advantage to domestic competitors.

This may put a firm at a competitive disadvantage to indigenous competitors in that country.

A company that has a formal statement of the ethical priorities that employees must follow has established a code of ethics. True False

True

A small country is short on cash for much needed infrastructure development projects. It could go to the World Bank for assistance. True False

True

Building an organizational culture that places a high value on ethical behavior requires incentive and reward systems that reward people who engage in ethical behavior. True False

True

Dumping is viewed as a method by which firms unload excess production in foreign markets. True False

True

Hofstede's power distance dimension focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities. True False

True

Keesha was working in Uganda for a multinational firm, and she was told that she would need to bribe government officials if she wanted to get her raw materials on time. She was uncomfortable with this as she had always felt bribes were unethical. This kind of pressure sometimes happens with expatriates who work abroad. True False

True

The movement toward regional economic integration has been most ambitious in Europe. True False

True

The rate at which one currency is converted into another is known as the exchange rate. True False

True

Today, nearly every nation in the world belongs to the United Nations. True False

True

Underlying most trade theories is the notion that different countries have particular advantages in different productive activities. True False

True

While a nation as a whole may benefit significantly from a regional free trade agreement, certain groups within the country may lose. True False

True

When is a currency said to be externally convertible? When both residents and nonresidents can purchase unlimited amounts of a foreign currency. When only residents can convert it into a foreign currency. When neither residents nor nonresidents are allowed to convert it into a foreign currency. When only nonresidents can convert it into a foreign currency without any limitations.

When only nonresidents can convert it into a foreign currency without any limitations.

The _____ was created in 1944 by 44 nations that met in Bretton Woods, New Hampshire, to promote economic development. World Bank International Trade Center World Trade Organization United Nation

World Bank

Most economists would probably argue that the best interests of international business are served by the government aggressively blocking trade. the government efforts to support certain domestic industries in a manner consistent with the recommendations of strategic trade policy. a free trade stance. a laissez-faire stance.

a free trade stance.

Free trade refers to a situation in which taxes are not imposed on goods that are produced and sold within a country. goods and services are offered for free to the citizens by a government. firms that function in a country are not taxed on the profits that they generate. a government does not try to influence what its citizens can buy from global markets.

a government does not try to influence what its citizens can buy from global markets.

All things being equal, which nation offers a more attractive place to do business? a nation where the rule of law does not take precedence over business a nation with a market-based economic system a nation that lacks democratic institutions a nation where economic activity is regulated by the state

a nation with a market-based economic system

Opponents of globalization argue that falling trade barriers reduce the pool of global labor. allow firms to move manufacturing activities to countries with lower wage rates. create manufacturing jobs in wealthy advanced economies. force countries to maintain manufacturing in their home countries regardless of wage rates.

allow firms to move manufacturing activities to countries with lower wage rates.

The Foreign Corrupt Practices Act was amended in order to outlaw grease payments. include environmental guidelines. make the bribery of foreign public officials a criminal offense. allow for "facilitating payments."

allow for "facilitating payments."

The government is considering placing additional taxes on foreign lumber imports that are a proportion of the value of the imported lumber. This is an example of an import quota. a specific tariff. a subsidy tax. an ad valorem tariff.

an ad valorem tariff.

Ford was the first company to mass-produce cars in the United States. This gave Ford a first-mover advantage, which is an economic and strategic advantage that accrues to early entrants into an industry. a strategic advantage given to businesses that send manufacturing offshore. a comparative advantage to the company making the first million dollars in the industry. governmental incentives provided to companies that are losing money.

an economic and strategic advantage that accrues to early entrants into an industry.

An American executive of a multinational electronics company finds that one of the company's production units in Thailand employs children to work in its factories. However, most of the children employed at the factory are orphans who will be sold as forced labor or pushed into prostitution if they lose their jobs. The executive finds that all the available alternatives to remedy this situation seem ethically unacceptable. In this example, the American executive faces the free-rider problem. a veil of ignorance. the tragedy of the commons. an ethical dilemma.

an ethical dilemma.

An international business is defined as one that implements homogenous practices across countries. any firm that engages in international trade or investment. a business that is restricted by U.N. regulations. the basis for a multinational enterprise.

any firm that engages in international trade or investment.

Foreign direct investment occurs when a firm invests resources in production and service technologies that will enhance globalization. business activities outside its home country. local agricultural production. competitor-based products.

business activities outside its home country.

What term refers to the accepted principles of right or wrong governing the conduct of businesspeople? ethical strategies business ethics goodwill just distribution

business ethics

It has been argued that the success of Japanese enterprises in the global economy has been based partly on the compartmentalization of different functions within Japanese companies. consolidation of self-managing work teams. high degree of managerial mobility between companies. cooperation between a company and its suppliers on issues such as design, quality control, and inventory reduction.

cooperation between a company and its suppliers on issues such as design, quality control, and inventory reduction.

A ________ occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate. foreign debt crisis banking crisis currency crisis crisis of the World Bank

currency crisis

The short-term movement of funds from one currency to another as an attempt to profit from shifts in exchange rates is called spot exchange. basis risk. currency speculation. a carry trade.

currency speculation

The EU began as a ______, which eliminates trade barriers between member countries and adopts a common external trade policy, but does not allow free movement of factors of production between member nations. political union free trade area common market customs union

customs union

Natalia works for a mid-range electronics company. The consumers in the company's domestic market are sophisticated and demanding and are constantly pressuring the company to innovate with new designs and technology. Which aspect of Porter's Diamond does this demonstrate? firm structure and rivalry demand conditions factor endowments related and supporting industries

demand conditions

If many people want euros and euros are in short supply, and a few people want Japanese yen and yen are in plentiful supply, the yen is likely to ________blank against the euro. strengthen depreciate appreciatere main stable

depreciate

Assuming the 60-day forward exchange rate was $1 = ¥110 and the spot exchange rate was $1 = ¥120, the dollar is selling at a(n) ________blank on the 60-day forward market. margin increment discount premium

discount

The extent to which a firm's future international earning power is affected by changes in exchange rates in the long run is known as ________ exposure. transaction financial economic translation

economic

A factory in Germany produces millions of auto parts a year, and has been able to reduce its costs per unit as it increased its production. This demonstrates the concept of economies of scale. product life cycle. first-mover advantage. production possibility frontiers.

economies of scale.

The role of the government in a market economy involves mobilizing economic resources of the country for public good. determining the prices at which goods and services will be sold. encouraging vigorous free and fair competition among private producers. planning the types and quantities of goods and services to be produced.

encouraging vigorous free and fair competition among private producers.

Anderson, Smith, and Bayles—an investment firm—is interested in investing in a production facility in Mexico. However, the firm is worried about unpredictable fluctuations in future exchange rates which would have adverse consequences for the firm. One way to ensure against this exchange risk is by engaging in hedging. employing a lead strategy. employing a lag strategy. engaging in currency speculation.

engaging in hedging hedging is when a firm insures itself aganist foreign exchange risks.

Which action was implemented in the Uruguay Round, finalized in December 1993? establishment of the World Trade Organization reduction in the protection for patents, trademarks, and copyrights extension of the GATT to cover consumer products enhancement of trade barriers

establishment of the World Trade Organization

What term refers to a set of moral principles, or values, that are used to guide and shape behavior? ethnocentrism ethical system caste system class consciousness

ethical system

The belief in the superiority of one's own culture is known as ethnocentrism. cultural relativism. the convergence hypothesis. cross-cultural literacy.

ethnocentrism.

Factor endowments refer to the extent to which a country has developed advanced facilities as technological infrastructure. extent of domestic rivalry that exists in a market or industry. extent to which a country is gifted with such resources as land, labor, and capital. positive industry structures and models that exist in a country or geographical region.

extent to which a country is gifted with such resources as land, labor, and capital.

The Bretton Woods agreement implemented a system of ________ exchange rates. currency board fixed floating managed floating

fixed

When Norway, Iceland, Liechtenstein, and Switzerland established the EFTA, all barriers to the free flow of goods and services between the countries were removed. Member nations were allowed to determine the level of trade protection for goods coming from all other nations. What level of economic integration does this represent? political union common market economic union free trade area

free trade area

Identify the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements. customs unions common markets economic unions free trade areas

free trade areas

Miller Corporation intends to build a new factory in a foreign country. However, the company is having a hard time getting the government to approve the necessary paperwork so construction can begin. To move the process along, Miller Corporation makes legal payments to the government officials. These payments are typically referred to as precautionary payments. excise taxes. hush money. grease payments.

grease payments.

Tanveer thinks that his individual freedoms should be guaranteed, and that people should be able to pursue their own economic self-interest. Tanveer is a proponent of individualism collectivism socialism totalitarianism

individualism

A managed float is the exchange rate policy where the government decides the exchange rate at which a country's currency is traded. does not intervene in the country's exchange rate system. intervenes in the exchange rate system only in a limited way. forms an agreement with other countries to fix the exchange rate.

intervenes in the exchange rate system only in a limited way.

The threat of antidumping action affects a firm by lowering its costs of exporting products to a country. enabling it to leverage economies of scale and increase its profits. increasing its ability to serve a country from locations outside of that country. limiting its ability to use aggressive pricing to gain market share in a country.

limiting its ability to use aggressive pricing to gain market share in a country.

A banking crisis refers to low interest rates offered by the banks. high levels of trade deficit in a country. high reserve requirements on the banks. loss of confidence in the banking system.

loss of confidence in the banking system.

The International Monetary Fund was established at the Bretton Woods conference to promote general economic development in the world. fund the initiatives of the United Nations. establish gold standards across the world. maintain order in the international monetary system.

maintain order in the international monetary system.

What principle or theory argues that it is in a country's best interests to maintain a trade surplus? new trade theory absolute advantage national competitive advantage mercantilism

mercantilism

The social rules and guidelines that prescribe appropriate behavior in a particular situation are called norms folkways values mores

norms

The term _______ refers to the values and norms that are shared among employees of an organization. organizational culture corporate responsibility multinational behavior ethical behavior

organizational culture

The United Arab Emirates (UAE) bases the valuation of its currency on the U.S. dollar. The value of the UAE's currency is changed based on the changes in the value of the dollar. This is an example of a ________ exchange rate system. pegged free float managed float currency board

pegged

A ________ rate means the value of the currency is fixed relative to a reference currency and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate. pegged exchange fixed exchange floating exchange currency board

pegged exchange

What is a feature of right-wing totalitarianism? governance by a single party, group, or individual based on religious principles involvement of people in the government, exercised either directly or through elected representatives monopoly of a group/party that represents the interests of a particular tribe provision of partial individual economic freedom along with restricted individual political freedom

provision of partial individual economic freedom along with restricted individual political freedom

Which is an example of an advanced factor, as proposed by Porter, that a nation will possess? natural resources demographics skilled labor location

skilled labor

The ________ committed themselves to achieving socialism without resorting to violent revolution and dictatorship. social democrats anarchists communists Maosists

social democrats

A Japanese tourist in New York goes to a bank to convert his yens into dollars. The exchange rate that will be used for conversion will be the historical exchange rate. futures exchange rate. spot exchange rate. forward exchange rate.

spot exchange rate.

General Motors' stand against apartheid in South Africa was based upon what came to be known as cultural relativism. the human rights movement. corporate social responsibility. the Sullivan principles.

the Sullivan principles.

A pesticide manufacturer has moved its production facility to a foreign country where it is free to dump pollutants into the local waterways. By doing so, this company is contributing to just distribution. cultural relativism. the global tragedy of the commons. ethical sustainability.

the global tragedy of the commons.

In his theory of absolute advantage, what did Adam Smith say should be the determinant of what a country imports and what it exports? the government policies of the country whether economies of scale can be realized the possibility of first-mover advantages the invisible hand of the market mechanism

the invisible hand of the market mechanism

Hofstede's masculinity versus femininity dimension examined the cultural changes resulting from women's liberation movements. the relationship between gender and work roles. the extent to which different cultures socialized women into tolerating uncertainty. the impact of education on the gender roles attributed to men and women.

the relationship between gender and work roles.

The outward stock of foreign direct investment refers to total export or import products from other countries. the total cumulative value of foreign investments by firms domiciled in a nation outside of that nation's borders. the entry of funds into a country when foreigners make purchases in the country's stock and bond markets. movements of labor, capital, and other factors of production between countries.

the total cumulative value of foreign investments by firms domiciled in a nation outside of that nation's borders.

The government of Iran is ruled by religious figures and they ensure that citizens adhere to Islamic teachings. Iran is a ________ law system. theocratic common civil traditional

theocratic

Contracts drafted under a common law framework tend to be inflexible and difficult to adjudicate. inexpensive to draw up between two parties. very short and general in scope. very detailed with contingencies spelled out.

very detailed with contingencies spelled out.

A lobbyist from New York argues that the U.S. government needs to protect the U.S. aerospace industry from foreign competition. She argues that aerospace technology is so important for national security that it would be dangerous to rely primarily on foreign producers for them. This is an example of ________ argument for government intervention. a self-defense an economical an environmental a political

a political

Suppose the United States wants to encourage the production of tree nuts by domestic producers. To do so, the government provides low-interest loans for the purchase of harvesting equipment and gives cash grants and tax breaks to the producers. Which instrument of trade policy is in use by the United States government? an ad valorem tariff a transit tariff a subsidy a specific tariff

a subsidy

Izzy was found guilty of a crime which demanded a prison sentence. The length of her sentence was based on previous cases similar to hers and what is traditionally prescribed for the type of crime she committed. Izzy was tried and convicted under a ________ law system common civil theocratic codified

common

Historically, command economies were found in ________ countries, where collectivist goals were given priority over individual goals. communist libertarian democratic free-market

communist

One of the impediments to integration arises from the fact that a nation as a whole typically does not benefit. concerns over national sovereignty. the fact that economic integration aids a minority. concerns that too many multinational firms will lose investors.

concerns over national sovereignty.